Sen. Schumer introducing bill to make price gouging on drugs in short supply a federal crime

The Washington Post on December 6, 2011 released the following:

“By Associated Press

TRENTON, N.J. — Price gouging on prescription drugs already in short supply would become a federal crime under legislation about to be introduced.

Sen. Charles E. Schumer, D-N.Y., said he’s proposing a bill that that would give the U.S. Department of Justice authority to crack down on “unscrupulous drug distributors” who sell hospitals life-saving prescription medicines in short supply at huge markups.

The problem has been growing this year, as shortages have dramatically worsened for normally cheap generic injected medicines that are the lifeblood of hospitals: drugs for cancer, pain, infections, even liquid nutrition and anesthesia for surgery.

The shortages are disrupting care of patients and even clinical trials of experimental drugs that must be tested against older standard treatments.

In September, The Associated Press reported that at least patient 15 deaths since mid-2010 have been blamed on the shortages. In one case in Alabama, nine hospital patients died after getting inadvertently contaminated liquid nutrition that had to be hand-mixed from a powder because the usual liquid version wasn’t available.

Schumer’s bill is to be introduced next week, an aide told the AP. It would allow penalties of up to $500 million for each case of price gouging.

“Forcing hospitals to buy life-saving medications at outrageously inflated prices is unquestionably unethical, and with this legislation it would be illegal, too,” Schumer said in a statement.

A Schumer spokesman said Monday that the senator is working on lining up co-sponsors to the bill. Earlier in October, Schumer requested an investigation by the Federal Trade Commission into possible price gouging by some distributors.

In a typical year, there are always some prescription drugs shortages. But the number of new shortages reported each year has tripled since 2006. As of Nov. 30, there had been 251 different new drug shortages this year.

Multiple causes have been cited, including manufacturing deficiencies leading to production shutdowns, companies ending production of some drugs with tiny profit margins, consolidation in the generic drug industry and limited supplies of some ingredients.

Hospital pharmacists and other officials say the shortages have become a crisis, endangering patients and costing hospitals significant money and staff time to try to obtain crucial drugs not available from their regular suppliers.

Some secondary suppliers say they are helping hospitals get desperately needed drugs by calling pharmacies and other suppliers around the country, and that the drugs have been marked up by other middlemen by the time the suppliers get them.

Politicians, responding to reports of patients harmed by shortages, have been taking up the issue, including President Barack Obama.

On Oct. 31, Obama signed an executive order instructing the Food and Drug Administration to broaden its reporting of potential drug shortages, speed up reviews of proposed production changes for drugs facing shortages, and give the Justice Department more information about possible collusion or price gouging.

That order included a key provision of another bill, which would require manufacturers to notify the FDA immediately of impending shortages of key drugs.

The bill was introduced by Sen. Amy Klobuchar, D-Minn., and recently was endorsed by the American Medical Association. It’s set to get its first committee hearing on Dec. 15, before the Senate Health, Education, Labor and Pensions Committee. A similar bill was introduced in the House by Rep. Diana DeGette, D-Colo.

This Wednesday, the Senate Finance Committee is set to hold a hearing on reasons for drug shortages.

The FDA held a hearing on Sept. 26 on causes and potential steps to address the shortages, three days after the health subcommittee of the House Energy and Commerce Committee held a similar hearing.

Also in the House, Rep. Elijah Cummings, the ranking Democrat on the House Oversight and Government Reform Committee, has been demanding information from secondary distributors accused of price gouging, asking where they are getting drugs in short supply, how much they are paying for them and what they are charging hospitals for the drugs. That committee held a hearing on price gouging on Nov. 30 and is trying to line up one with manufacturers of drugs in short supply.”

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.